Brussels will name Panama on a blacklist of countries and jurisdictions that are failing in the fight against money laundering and terrorist financing, a move that will require European banks to carry out intrusive vetting of customers from the Gulf state.
European Union (EU) officials said the European Commission was in the final stages of adopting the 23-country list, which is likely to be politically contentious and will accuse governments of “strategic deficiencies” in their efforts to combat dirty money.
Also on the list is the US Virgin Islands, American Samoa, Libya and Saudi Arabia, although Russia is not listed despite revelations last year of billions in criminal funds being transferred from the country through EU banks. EU officials said Russia was being kept under review.
Under EU law, Europe’s banks will have to carry out “enhanced” checks on funds coming from these countries — essentially more intrusive vetting of customers to establish the purpose of payments, the origins of the money, and the true beneficial owners of companies involved.
Banks would be required to act on suspicions by steering clear of dubious transactions and passing any concerns onto the authorities.
The move against Saudi Arabia is likely to stoke tensions between Riyadh and European capitals already heightened by the murder last year of the columnist Jamal Khashoggi at the Saudi consulate in Istanbul. Brussels and European countries have raised serious concerns about the Khashoggi case -which Riyadh has blamed on a rogue operation- but have so far shied away from tough action.
Saudi diplomats in Brussels could not immediately be reached for comment.
The blacklist, the first of its kind from the commission, marks Brussels’ attempt to get on the front foot after last year’s high-profile laundering scandals such as revelations that as much as €200bn of dirty money went through the Estonian branch of Danske Bank — which damaged faith in national regulators’ and banks’ enforcement of EU rules.
Brussels is seeking to draw up a more comprehensive list than the one compiled at international level by the Financial Action Task Force, an organisation established 30 years ago by the G7.
That list, which contains 13 countries including Iran and Sri Lanka, has come in for criticism from EU lawmakers for not including others, such as Panama, that have been criticised over recent high-profile financial scandals.
Miguel Verzbolovskis, Panama’s ambassador to the EU, said his country’s inclusion on the blacklist would – if confirmed — be “highly unfair” and a source of “deepest dismay”.
The envoy branded the commission’s assessment process opaque and said it took insufficient account of his country’s progress in addressing problems through several years of work with the FATF to improve laws and administrative practices.
Mr Verzbolovskis added: “It is disappointing that the commission fails to distinguish between countries that recognise areas for improvement and seek to address and rectify them through democratic means, and those that are indifferent to international criticism and thrive through deplorable practices.”
Brussels’ criteria for drawing up the list included the rigour of countries’ banking rules, the transparency of corporate ownership and the kind of punishments doled out for laundering and terrorist financing offences.
The list was provisionally endorsed by the commission last week and is due to be adopted in early February following consultations with national government experts. The commission declined to comment on the plans.
Vera Jourova, the EU justice commissioner, has already underlined there would be “follow-up” contacts with listed countries to see if problems have been addressed. “This has to be a transparent process”, she told MEPs last year. “Countries will not be taken by surprise.”
Jim Brunsden and Michael Peel in Brussels